Term
| C) Risk of incorrect acceptance |
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Definition
Which of the following is not an aspect of sampling risk?
A) Risk of assessing control risk (and the risk of material misstatement) too high.
B) Risk of not identifying a misstatement included in a sample.
C) Risk of incorrect acceptance.
D) Risk of sampling results indicating that a population is materially misstated when it is not. |
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Term
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Definition
Which type of sampling plan is most frequently used in testing control activities?
A) Attributes sampling
B) Discovery sampling.
C) Probability proportional sampling
D) Classical variables sampling. |
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Term
| D) Expand substantive procedures. |
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Definition
What is ordinarily the preferable course of action when an auditor finds a higher than expected deviation rate when sampling controls?
A) Triple the size of the sample to further analyze potential problems.
B) Project the level of deviation to the entire sample, and if material qualify the audit opinion.
C) Continue to selection items from the population until the error rate diminishes to a tolerable level.
D) Expand substantive procedures. |
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Term
| B) The sample mean audited value multiplied by the number of items in the population |
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Definition
The mean-per-unit estimation method calculates the estimated total audited value of a population of accounts receivable as which of the following?
A) A summation of the total individual accounts values in the population.
B) The sample mean audited value multiplied by the number of items in the population.
C) The estimated total audited value of the population multiplied by the number of items in the sample.
D) The summation of the sample multiplied by the number of discrete samples in the population. |
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Term
| C) Difference between the book value of the population and the sample audited mean multiplied times the number of items in the population |
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Definition
The projected misstatement under the mean-per-unit estimation is which of the following?
A) Difference between the sample audited mean and the population audited mean.
B) Difference between the projected misstatement and the population mean for the population.
C) Difference between the book value of the population and the sample audited mean multiplied times the number of items in the population.
D) Average difference between the projected audit value and the book value of an account. |
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Term
| A) The maximum misstatement that may exist without causing an account to be materially misstated |
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Definition
What is the best description of "tolerable misstatement" for mean-per-unit estimation?
A) The maximum misstatement that may exist without causing an account to be materially misstated.
B) The "bounds" around the sample mean that we would expect the value to fall within to be correct.
C) The "projected" misstatement in the population based upon the sample chosen.
D) The upper limit (or lower limit for liabilities) of asset values for which the book value may exceed that sample mean without being materially misstated |
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Term
| C) An amount used to calculate the "bounds" around the sample mean that we would expect the value to fall within to be correct |
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Definition
What is the best description of a planned allowance for sampling risk under mean-per-unit estimation?
A) The projected misstatement in the population based upon the sample chosen.
B) The maximum misstatement that may exist without causing the financial statements to be materially misstated.
C) An amount used to calculate the "bounds" around the sample mean that we would expect the value to fall within to be correct.
D) The upper limit (or lower limit for liabilities) of asset values for which the book value may exceed that sample mean without being materially misstated |
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Term
| A) Conclude the book value is materially misstated and the projected misstatement is $150,000 |
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Definition
In the course of auditing accounts receivable, the auditors calculated the estimated total audited value ($3,100,000), the allowance for sampling risk ($100,000), and the tolerable misstatement ($175,000). If the book value of accounts receivable is $3,250,000, what is the audit conclusion and projected misstatement?
A) Conclude the book value is materially misstated and the projected misstatement is $150,000.
B) Conclude the book value is materially misstated and the projected misstatement is $50,000.
C) Conclude the book value is not materially misstated and the projected misstatement is $150,000.
D) Conclude the book value is not materially misstated and the projected misstatement is $50,000. |
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Term
| C) When differences between book and audited values are frequent |
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Definition
When are the ratio estimation and difference estimation techniques most likely to be preferable to the mean-per-unit estimation method?
A) The choice between any of the methods method is irrelevant, since they all provide similar results.
B) When differences between book and audited values are infrequent.
C) When differences between book and audited values are frequent.
D) When differences between book and projected misstatement is estimated to be small. |
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Term
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Definition
A company's 1,000 accounts receivable have a total book value of $40,000 (Average book value = $40). An audited sample of 50 accounts resulted in the following mean values:
Book value of $38.00
Audited value of $39.20
What is the estimated total audited value using mean per unit sampling?
A) $38,000
B) $38,776
C) $39,200
D) $41,200 |
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Term
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Definition
A company's 1,000 accounts receivable have a total book value of $40,000 (Average book value = $40). An audited sample of 50 accounts resulted in the following mean values:
Book value of $38.00
Audited value of $39.20
What is the estimated total audited value using difference estimation sampling?
A) $38,000
B) $38,776
C) $39,200
D) $41,200 |
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Term
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Definition
A company's 1,000 accounts receivable have a total book value of $40,000 (Average book value = $40). An audited sample of 50 accounts resulted in the following mean values:
Book value of $38.00
Audited value of $39.20
What is the estimated total audited value using ratio estimation sampling?
A) $38,776
B) $39,200
C) $41,200
D) $41,263 |
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Term
| A) Control risk, inherent risk, and risk related to other substantive procedures |
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Definition
In determining the sample size using a structured nonstatistical sample, the reliability factor used takes into consideration the auditor's assessment of?
A) Control risk, inherent risk, and risk related to other substantive procedures.
B) Control risk and detection risk.
C) Control risk and inherent risk.
D) Detection risk. |
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Term
| B) In nonstatistical sampling the level of risk is not formally quantified, instead auditors use their professional judgment |
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Definition
What is the major difference between statistical and nonstatistical sampling in substantive testing?
A) In nonstatistical sampling the determination of the sample size is ad hoc based upon the auditors' professional judgment.
B) In nonstatistical sampling the level of risk is not formally quantified, instead auditors use their professional judgment.
C) The results of nonstatistical sampling are not as reliable as those in statistical sampling.
D) Nonstatistical sampling uses more randomized methods for sample selection and thus is more reliable. |
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Term
| C) The auditor would conclude that the risk is high that the account is materially misstated |
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Definition
If the projected misstatement in nonstatistical sampling is $95,000, while the tolerable misstatement is $100,000, what would an auditor likely conclude?
A) Since the projected misstatement is less than the tolerable misstatement, the auditor would conclude the account is not misstated.
B) Since the projected misstatement is less than the tolerable misstatement, the auditor would conclude the account is misstated.
C) The auditor would conclude that the risk is high that the account is materially misstated.
D) There is not enough information to answer this question. |
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